Abolition of US chips and Trump's bold economic reforms send shockwaves through the market

The series of economic policies announced by the Trump administration are attracting attention. With three main pillars—tax cuts revival, abolition of tip tax, and strategic tariff implementation—a large-scale structural transformation of the U.S. economy is about to begin. However, the impact is more complex than expected and could ripple across the entire market.

The Divergence Between Employers and Consumers Caused by Tip Abolition

The tip tax abolition policy proposed by the Trump administration appears, at first glance, to be a boon for service industry workers. Workers in restaurants, hotels, and the taxi industry will be able to keep all their received tips as take-home pay, significantly reducing their tax burden. This measure is expected to increase disposable income for low-income households.

However, the introduction of tariffs to compensate for this benefit has emerged as a burden on consumers. To maintain policy consistency, the plan is to offset the revenue loss from tip tax abolition with tariffs on imported goods from specific countries.

Tariffs Could Hit Household Budgets More Severely Than Expected

The most concerning point is that tariffs directly affect consumers’ living costs. In particular, the proposed 60% tariff on imports from China could increase the annual burden for an average American household by about $1,700. Another economic analysis predicts that the impact could be even larger, forcing an additional expenditure of $1,500 to $1,700 annually.

Low- and middle-income consumers are likely to be most affected. Since these households spend a large portion of their income on daily necessities and services, the impact of price increases will be relatively significant. If tariffs are passed on to product prices, they could offset the benefits of tip tax abolition.

Revival of Tax Cuts and Energy Policies Driving Economic Structural Change

Meanwhile, the reduction of corporate tax rate to 21% and the revival of previous administration’s tax cuts aim to stimulate corporate investment. Expanding pass-through income deductions and promoting capital expenditure are part of the effort to strengthen domestic industry competitiveness.

Strengthening the energy sector is also a key pillar. The goal is to provide affordable energy to consumers and create stable employment while reducing U.S. carbon dioxide emissions to the lowest level in 25 years. This policy has the potential to create a favorable environment for manufacturing industries and technology companies.

Market Concerns Over an Economic Growth Slowdown Scenario

Many experts warn about the contradictions within this policy package. The introduction of tariffs could disrupt existing trade flows and increase supply chain costs. Domestic producers may be forced to raise prices to compete with foreign products, raising concerns about inflationary pressures.

As a result, there could be a short-term slowdown in consumption, leading to a deceleration of economic growth. If that happens, the benefits of tax cuts may be limited, and the overall effectiveness of the policy could be undermined.

Future Focus on Congressional Response and Implementation Strategy

The Trump administration appears to be pushing for rapid implementation of these policies through Congress. However, balancing economic effects and household burdens will be the key to the success or failure of these policies.

The overall trajectory of the U.S. economy will depend on the global ripple effects of these policies and how market participants respond.